Guarantee Dispute Resolution Method refers to the agreed mechanism for resolving disputes in independent guarantees or demand guarantees, when disputes arise between the applicant and beneficiary, or between the guarantor bank and beneficiary, regarding payment, interpretation of terms, fraudulent claims, etc. Common methods include litigation, arbitration, negotiation, and expert determination. It is typically used in international engineering contracting, commodity trading, shipbuilding, and other transactions involving large advance payments or performance guarantees. Note: It is necessary to clearly specify the governing law, competent court or arbitration institution, arbitration rules, and the effect of the award to avoid high dispute resolution costs due to unclear provisions; also distinguish disputes over the guarantee itself from disputes over the underlying contract, as under an independent guarantee, the bank's payment obligation is generally not affected by disputes over the underlying contract. Unlike other terms such as 'Guarantee Applicable Law' and 'Guarantee Jurisdiction Clause', the dispute resolution method focuses more on procedural arrangements rather than substantive law application. In practice, arbitration is recommended because its awards are more easily enforceable across borders under the New York Convention.
📝 Examples
1. In a power plant EPC project in Bangladesh, the contract stipulated that the dispute resolution method for the performance guarantee was arbitration by the Singapore International Arbitration Centre under Singapore law. (Note: This clarifies the arbitration institution and applicable law, avoiding the uncertainty of litigation in the host country's courts.)
2. After receiving notice from the issuing bank of its refusal to pay under the guarantee, we immediately initiated arbitration with the China International Economic and Trade Arbitration Commission in accordance with the dispute resolution method stipulated in the guarantee. (Note: This demonstrates the practical operation of initiating arbitration proceedings based on the guarantee terms after a dispute arises.)
💡 Foreign Trade Tips
Foreign trade terms are the foundation of international business communication
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